Nagra has divested its SmarDTV business. The firm announced during the first quarter of 2018 that it was looking for a buyer; in Neotion – the French conditional access vendor – Nagra has found one. Neotion will acquire SmarDTV’s conditional access module (CAM) and pay TV set-top box assets, while Nagra will retain SmarDTV’s plants in the UK and France, as well as SmarDTV’s entire patent portfolio. The USD 20m transaction hinges upon Nagra’s licensing the SmarDTV patents to Neotion, and to Neotion’s newly created SmarDTV Global affiliate.

Our analysis

SmarDTV’s divestiture has less to do with the fortunes of Nagra’s CAM business itself, and more to do with the health and long-term positioning of Nagra’s digital television segment.

Nagra’s SmarDTV subsidiary has not precipitated value destruction outright. Although the CAM and device business has not grown materially, SmarDTV consistently generates on the order of USD 20m per annum. However, in the context of a struggling digital television segment, SmarDTV’s devices do not represent a long-term source of value creation.

Faced with the task of refocusing its Integrated Digital Television business – the segment has hovered around USD 650m for the past five years – Nagra is pursuing three strategies simultaneously: exploring new, analytics-related opportunities; continuing to support its OpenTV software and user-experience assets; honing its content security products and solutions.

SmarDTV’s sale is part-and-parcel of Nagra’s defining a progressive content security strategy. The sale, in conjunction with the full integration of Conax and NexGuard assets, signals clearly where the firm believes opportunity to lie: in the DRM, secure player, embedded security, watermarking, and anti-piracy monitoring markets.

The firm will continue to offer card and cardless conditional-access systems; this remains a huge industry, and a major source of revenue. However, the decision to exit the physical CAM business, and reorganize the product portfolio around unmanaged-device security and active anti-piracy solutions, is sensible. The conditional access business generated USD 1.9bn in 2017, and we expect the market to shed 6% of its value, year-on-year, through 2021.